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One of the main factors the Pecora Commission cited as a possible cause for the 1929 crash was the wide range of abusive practices on the part of banks and bank affiliates... these abusive practices included a variety of conflicts of interest such as the underwriting of unsound securities in order to pay off bad bank loans as well as "pool operations" to support the price of bank stocks... following the the Pecora Commission, the Glass-Steagall Act of 1933 was established to protect the public against the abuses made by the banking industry, unfortuntely; 70 years later, Wall Street interests were able to repeal Glass-Steagall Act in 1999.
With the Glass-Steagall Act repealed 1999, Wall Street was able to start its slow-motion repeat of the banking circumstances preceeding the 1929 crash, for example; the current US Secretary of Treasury is none other than an ex-CEO of the Wall Street giant investment bank; Goldman Sachs... Goldman Sachs has been heavily involved in the securitization business on Wall Street over the past decade... securitization is a buzzword for the packaging of debt which is then sold to investors, products like; sub-prime mortgages, CDO's, ABCP's, etc, etc, which have now been found to be riddled with fraud... and which are now at the base of Wall Streets problems.
The economic and financial landscape of 2007 bears striking similarities to 1929. Back then, there were large, unregulated pool operators and other insiders constantly muscling the tape in whatever direction they chose. The public, too, was involved, thinking the country was experiencing a new era. Meanwhile, business began deteriorating in the spring of 1929, though the partying in stocks lasted until the fall.
To give you a flavor of those times, I'd like to quote from Frederick Lewis Allen's "Only Yesterday," which is one of my favorite books about 1929: "Mergers of industrial corporations and of banks were taking place with greater frequency than ever before, prompted not merely by the desire to reduce overhead expenses and avoid the rigors of cut-throat competition, but often by sheer corporate megalomania. (My emphasis.) And every rumor of a merger or a split-up or an issue of rights was the automatic signal for a leap in the prices of the stocks affected -- until it became altogether too tempting to the managers of many a concern to arrange a split-up or a merger or an issue rights not without a canny eye to their own speculative fortunes."
Obviously, I don't need to point out how similar that is to the practices we are seeing today.
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